Here’s What to Ask When Choosing a PEO

Article main image
Oct 24, 2018

You have an HR problem.

You’re swatting metaphorical gnats — HR administrative tasks that are persistent, complex, and headache-inducing. You don’t have the time to take care of all these tasks on your own (or within your already established team), so you’re considering outsourcing to a Professional Employer Organization (PEO) company.

Finding the right PEO company will be critical to your success. As a PEO for small to midsize businesses, we know a thing or two about what the best PEOs have to offer. As you shop around, here are several questions you should ask to learn about and narrow down your choices:

1. What are the credentials of the PEO’s employees?

You wouldn’t trust your expensive luxury vehicle to a first-time mechanic, and you wouldn’t hand your newborn baby to an inexperienced babysitter. So why would you place the livelihood of your company in the hands of a PEO company whose employees don’t have the expertise to help you navigate all your HR challenges? Make note of every employees’ specialties so you can make sure the company has every aspect of human resources covered. Be sure to find out their competencies in benefits, payroll, compliance and regulations, and even the number of years they’ve worked in HR. Each of these areas has designations professionals can obtain through organizations like SHRM. These designations will also indicate to you that the PEO company you’re investigating knows what they’re doing.

2. What is the experience level of the PEO company?

Beyond looking at the credentials of individuals within the PEO, you’ll also want to identify the experience level of the PEO company as a whole.

  • How long has the PEO been in business?
  • What is the average tenure of their staff?
  • How long do clients stay with the PEO?
  • Does the company provide references and testimonials?
  • Is it a Certified PEO (CPEO)? CPEO designation holds organizations to very strict financial reporting requirements. IRS-designated CPEOs file their taxes accurately and on time, and manage their business financials well (so the business remains healthy and won’t disappear overnight). CPEO designation is difficult to earn — of 900 PEOs in the industry, fewer than 10%  hold CPEO designation.
  • Is it accredited by the Employer Services Assurance Corporation (ESAC)?

3. Will it meet your needs?

An often-heard complaint from customers of larger PEO companies is that their calls don’t get answered in a timely manner, or they get pushed into an 800-number calling service and don’t know who’s going to call them back. When you’re dealing with employee benefits and HR needs, responsiveness and customer service should never be compromised. To make sure the PEO company you’re interviewing is proactive about meeting its clients’ needs, ask the following questions:

  • Is there a service level agreement?
  • What is the expectation for returning phone calls and emails?
  • Do you provide cell phone numbers to key clients?
  • Do you have a dedicated team for customer service?

4. What technology is provided?

Partnering with a PEO company should allow your organization access to advanced technology. Often, PEOs give small and midsize businesses automation and efficiency they wouldn’t have access to otherwise. To find out what tech they offer, ask these questions:

  • Does the PEO offer clients self-service features?
  • What does reporting look like from a client’s perspective?
  • Do clients and their employees get access to the data?
  • Do you get a demo to see how the PEO’s software/system really works?
  • Can you compare their technology to other options?

5. What about health insurance?

Business owners are used to getting renewals for health insurance every year and making changes to mitigate increases. One of the large value propositions of a PEO is that they should be able to more effectively provide benefits than a small business can on its own. To dig deeper in this area, ask:

  • What is the PEO’s philosophy to mitigate increases on insurance? Do they give lowest-costing options? Do they take away benefits valued by employees? We think what’s important to businesses and employees is a stable benefits platform that doesn’t change year over year, but that offers enough choice for employees to reduce their costs if needed.
  • Do they change carriers frequently?
  • Do they change plans frequently?
  • How do they manage overall risk in a health plan?

6. How flexible is the PEO solution?

When choosing a PEO company, make sure you know whether it is a one-size-fits-all PEO or a custom HR solution that meets your needs as you grow.

  • What are their employee handbooks like? Steer clear from PEOs that offer templates to meet federal requirements. You should be getting more for your money. Look for customization that meets the needs of your organization, addresses what’s unique about your business, and speaks to your culture now and in the future.
  • Will the PEO offer you more help as your business grows? With growth comes complexity, and the need for more help. Larger companies are subject to more regulation, including FMLA and ACA requirements.

The expectation is that the PEO company you partner with will be able to help you both where you are now, and where you want to grow.

This article was originally published on the Genesis HR Solutions blog.